On January 1, 2013, as part of the Health Care Reform Act (Patient Protection and Affordable Care Act P.L. 111-148), a 3.8% Surtax is expected to be levied against certain net investment income for individuals with modified adjusted gross income (MAGI) of $200,000 or more and married couples with MAGI of $250,000 or more.
Here are several planning tools you may want to implement during 2012 to minimize your tax hit in 2013.
1. Sell highly appreciated investments that you have held for at least a year and pay tax at the current 0 – 15% capital gain rate (scheduled to increase to 20% in 2013).
2. Consider accelerating income into 2012. If you are of retirement age (59 ½) you can consider withdrawing income from your IRA or converting a traditional IRA to a ROTH IRA.
3. You might want to exercise some stock options in 2012.
4. If you have a C-Corporation, consider increasing dividends in 2012 while they are still taxed as capital gains (they will be taxed as ordinary income in 2013)
There are many tax law changes scheduled for 2013, so planning now can save you tax dollars in the future. Contact us soon to schedule your planning appointment.
Posted by Suzan Ross, CPA/PFS
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